Will History Repeat ?

When looking at Nifty movement, it looks like history might repeat exactly. One such movement is what is happening now compared to January 2021. In January 2021, Nifty started the series around 13,990 and by 20th of January 2021, it moved to 14,660. This was an increase of around 5%. Later in just 9 days, it fell to 13,630 (Fall of around 7%). In another 15 days, by 15th of February 2021, Nifty was trading around 15,320. This was an increase of around 12.5% in just 15 days. This was one of the highly volatile month in the last 1 year

It look like the same is repeating now. By Start of October 2021, Nifty was trading around 17,550 and in 18 days it moved to the all time high of 18,604.45. This was a rise of around 5.8%. Later in 2 weeks around 10 trading sessions, nifty fell to 17,670. This was a fall of around 5%. If history repeats and if nifty started to climb 12.5% in just 15 days as in February 2021, then nifty will touch a new all-time high of around 19,850

The only difference is FIIs were net buyers and they bought heavily in February 2021 and now they are net sellers. If FIIs started to buy as before, then nifty would definitely climb the rocks and we will see the unimaginable all-time high in short time. We should also note that most of the Indian companies reported the positive earnings for September 2021. The Indian markets were trading at a higher level and it looks like FIIs were booking the profits

It is actually a good market for the investors to stay invested and continue investing as the valuations are consolidating or the share prices are correcting. No index or stock will keep on going in a single direction. There should be a correction both ways and that is healthy for the market too. As we are nearing Diwali and only 3 trading sessions left for the festival, there is expected for a violent move upwards soon

Stay invested consistently and gain abundance wealth over time.

Disclaimer: Above blog is for informational and educational purpose and this is completely my personal opinion. Consult your financial advisor before investing. Share market is subjected to high risk for speculators and short term traders.

Have a Great Day

B G Nareshkumar

Rebalancing

Rebalancing is a standard practice in which most of the experienced investors pay attention every year. Let's say we have planned to allocate our funds as 60% in Stocks, 30% in Bonds and 10% in Cash. Imagine the stock market returns has gone high last year comparative to the returns received from the bond investment. Now the allocation of our assert would not be like before, it might have changed like 65% in Stocks, 26% in Bonds and 9% in Cash. In this case, it is important to re-balance our fund allocation as we desire

The reason for allocating the fund or investing in different segments is to manage the risk or to handle the crisis appropriately. If we are not monitoring this balancing of our fund, then it gives no meaning when the percentage of investments vary over long term. It is not required to close all the stocks which we hold every year and re-invest in stocks to balance the funds

Let's assume we have a portfolio consisting of 9 stocks and we have received great returns this year. 5 stocks out of 9 gone out of our expectation and trading well. So we don't need to touch those stocks for re-balancing. Also remaining 4 stocks might have the future plans and 3 out of those 4 stocks can have the potential to give great returns in coming years. Hence we don't need to touch them for re-balancing. The remaining 1 stock which does not meet the expectation can be considered for rebalancing. Not necessary to close that whole stock, the percentage of that particular stock can be reduced for re-balancing

The similar process can be followed if the bond market returns are higher. The percentage return received from bond market is well known in advance, so the process is easy to sell few percentage of bonds and invest in other investing medium for re-balancing. Rebalancing kill the fear of losing and helps one to hold on to the positions long enough as they desire. However, this re-balancing should not be done very frequently. This should be given certain amount of time say like every year and not every month.

Have a Great Day

B G Nareshkumar

Contentment

In my personal opinion, Contentment can also be stated as being happy or fulfilled after performing any action. Why being contented is important in stock market or in any financial instrument ? In making any investment like fixed deposit / recurring deposit / purchasing any bond, we know what is the return for desired tenure and we feel pleased before taking the plan. By this way we feel contented, this contentment will allow us to hold the investment for the desired tenure like 1 year or even 5 years or even more

Let's say we have invested in Fixed deposit and the bankers informs the return would be so much without mentioning the time frame to it. Will we be contented ? Definitely not. There is always a time factor which determines the contentment, particularly in financial world. In other investments, Bankers will gives us the time frame and interest for the amount invested 

In stock market, we should fix our time factor to feel contented. No one will fix the time for your holdings except you. Before investing in stock market, we should know how long are we going to hold any particular stock. We also should know without disturbing the invested stocks compounding, can we manage our expenses for the defined time. If these 2 questions are answered before buying any quality stock, then the compounding will take care of the investment and the contentment towards the investment will be high

When the time given for the investment is high, the returns delivered will also be high. It is not advisable to keep changing the positions / holdings frequently. Most people / traders do not have the contentment towards their holdings, this is one of the main reasons they keep booking the losses or small profits and end up in stress. Working in stock market with stress is like having 0% contentment. In short, To gain wealth be contented, To be contented define the time. Rest will be taken care by compounding (make sure the time given to your investment is the maximum you can give)

People have different opinion in different forms of investments. Let compare stock market investor with real estate investor. The real estate investor buys a piece of land considering that it will give better returns in long term (15 years or 20 years or even more). They don't think about the dividend or bonus when investing in real estate. They feel very contented with that and because of that they hold that for many years. People who buy a land will not go and look at that quiet often. They just visit it in a while to know the status of its surroundings and its value but surprising in stock market, traders keep looking at it all the time to know the status and to book even a small profit immediately

In stock market, many traders (not all) have the opinion of buy today and sell tomorrow or they have the mind set of immediate gratification. I have seen few traders these days, holding a position for a week is too long for them but they would have bought some acres of land 10 years ago and will still hold to it. There might be many reasons but one of the main reasons is not having the contentment in stock market holdings. Many traders are always skeptical about their holdings in stock market. Only having the proper contentment in stock market holdings which is invested consistently with patience can generate abundance wealth over period of time

In stock market, there are options of buying as small as possible and consistently invest over period of time. This might be missing in real estate holdings and making immediate cash or closing any holdings is not easy like stock market. I'm really not against any real estate investments. Real estate investments are good but my view is, people / traders invest in real estate with high level of contentment but the same trader will not have the same level of contentment in stock market investing. This culture or mindset is important in stock market trading / investing

I wish the reader of this blog to define time to be contented in their stock holdings and enjoy abundance wealth over time.

Have a Great Day

B G Nareshkumar

Net Worth

How much we earn and How much we save is the most commonly used measuring instrument to many people. Actually, it should be What is our Net Worth. If you see any successful people on this planet, they speak only in terms of the Net Worth and they never speak how much they earn or save. Net worth in simple terms can be described as ( Value of all Assets - Total of all liabilities )

When we talk about this Net Worth, lets say if we earn 30 Lakhs a year and if we spend or our liability is around 25 Lakhs. Our net worth is still less. We can never term ourself somewhere near to 30 Lakhs. So, our focus should be to increase our net worth not just how much we earn and save

There are 3 concepts which can increase our net worth

• Increase the earnings or assets and maintain or control the expense or liability
• Maintain the earnings or assets and reduce the expenses or liability
• Increase the earnings or assets and reduce the expenses or liability

As we can see from the above points, we can easily understand the third point is more powerful and it can increase the net worth quickly as possible. Let's deep dive into this concept, let's say we are earning Rs.5,000 today and everyday. If we spend Rs.3,000 everyday for daily needs and save Rs.2,000 for future. Then our Net worth is Rs.2,000 per day. If i do this everyday, our net worth increase by Rs.2,000 everyday and in a months of 30 days, we would be holding a net worth of Rs.60,000

Instead of saving Rs.2,000 everyday, we invest in a quality company or in any investment channel like FD / RD / Bonds and so on... which gives additionally Rs.50 per day as interest without compounding. This means additionally we are getting Rs.1,500 per month from this interest. So the net worth is Rs.61,500

Now, lets say we are getting an interest of Rs.50 per day (1st day) from our investment of Rs.2,000 and it compounds its interest the next day. Let' say we get an interest of Rs.55 the second day and Rs.60 the third day and so on. If this compounding is done efficiently, the interest which we received from the compounded amount itself will take care of our expenses and liability in the long term. The earnings made by us will be an total net worth

If this is managed efficiently further, the compounded amount alone will have an extra after deducting our expenses and liability and our Net worth will be more than our earning made. Which means in our above example we would have earned Rs.30 Lakhs per year and our net worth would be Rs.30 Lakhs + earnings made from investing after deducting our expenses

So, our focus should be on having the Net worth more than our earnings. This can be achieved only through consistently investing and compounding our money. This requires huge amount of patience. Patience can be achieved by continuous learning and self-discipline

I wish everyone who reads this blog compounds money effectively and increase your net worth. Focus on your Net Worth not just on your Earnings and Savings.

Have a Great Day

B G Nareshkumar

Rs. 10,000 Crores

The power of retail investors is gaining these days in Indian stock market. People are switching from Saving to Saving and Investing. This is a welcome move by Indian people who turned to be a potential investors in Indian stock market. In September 2021, money inflow into the stock market through Mutual Fund SIP (Systematic Investment Plan) has crossed Rs.10,000 Crores for the first time

This huge amount of investment every month means, the market has the great capacity to march forward with a great passion. Investors opened new 26 Lakhs (2.6 Million) SIP accounts in September 2021. Besides SIP, launch of new fund offers (NFOs) and up move in stocks also boosted inflows of this huge money into the markets. NFO (New Fund Offers) is a first time subscription offer for a new scheme that has been launched by an Asset Management Company. Once the NFO is over, the fund will reopen for subscription again and investors have the option to subscribe at the prevailing Net Asset Value (NAV). In September 2021, 5 NFOs alone collected around Rs.6,580 Crores

Let us take an example of a companies which turned their market capital to Rs.10,000 Crores. Navin Fluorine International Limited market capital has risen 147% to 12,303 Crores in 2020. Current Market Capital of the company as of October 2021 even raised and it is Rs.16,624 Crores. This means with the amount of SIP flowing into the Indian stock market every month, a company like Navin Fluorine can be started every month. In 1 year, the company has given 100% return considering the all-time high of 4,212.75

When compounding this 10,000 Crores SIP every month at the rate of 18% CAGR, Nifty and Indian companies has a great growth in coming years. It would not be surprising me if Nifty reach 25,000 or more by end of December 2022 with this much amount of money flowing into Indian stock market. The secret for Indian investors would be to buy on dip and hold firmly atleast for 1 year to get abundance wealth

It is more evident that the money inflow into the stock market will only increase going forward than the money outflow. When the SIP method is attracting more money into the market, it is stable and will happen for atleast a year or so. In addition to that, there will also be high investments flowing into the market considering the growth

Few other activities around Rs.10,000 Crores investments are

Textile Sector: Production Linked Incentive (PLI) Scheme has been approved for textile sector at the total outlay of Rs.10,000 Crores over the next 5 years. This scheme will help to create additional employment for over 7.5 Lakh people directly. This scheme will also allow women participants in large number

Auto Sector: India launched its National Automobile Scrappage Policy in August 2021. This policy would attract the fresh investment worth Rs.10,000 Crores towards the development of scrapping infrastructure. Union Minister Nitin Gadkari also told, car makers may be urged to offer 5% concession to those producing a scrappage certificate of an old vehicle. This also generates more jobs in the auto and scrapping industry

Tata Motors is setting up a Registered Vehicle Scrapping Facility (RVSF) in Ahmedabad to recycle up to 36,000 vehicles a year. An MoU for the same was signed with the Gujarat government. Improved sales globally will fetch spill over benefits for the Centre and states in terms of GST earning of Rs.40,000 - Rs.50,000 Crores for the Centre and Rs.30,000 - Rs.40,000 Crores for the State

• 
  Vodafone Idea Promotors will be investing Rs.10,000 Crores in the company. This was assured to the government by the promotors, Vodafone Plc and Aditya Birla Group

• Berger Paint India eyes to make a turnover of Rs.10,000 Crores in FY24

• Aditya Birla Group firm Hindalco Industries planning to invest Rs.8,000 - Rs.10,000 Crores in Hirakud, Silvassa and Mundra Plants

• RBI (Reserve Bank of India) stated that, Small Finance Banks (SFB) get Rs.10,000 Crores facility for lending Small Businesses

There are companies who are trying to increase their production, revenue and profits. With so much of activities going around the big businesses in India, it is evident that the stock market will grow going forward. The only and toughest job to be followed by investors is to identify the quality companies and stay invested for atleast next 5 years with patience.

Disclaimer: This blog is for informational and educational purpose. This is not an investing or trading idea. Consult your financial advisor before investing.

Have a Great Day

B G Nareshkumar

Deleverage

Deleverage is generally termed as reducing one's debt by selling one or few of the assets. In my personal opinion it can also be termed as reducing one's debt by repaying through the profit earned in businesses or investments. Deleveraging is one of the best way to increase the profit. Deleveraging also attracts investors and share holders

In India, now many companies are following this process of repaying their debt's through the profit earned in the businesses. This is one of the reason Indian economy is growing post covid pandemic (Though it is not official announced as covid is over, as the businesses are running as normal as pre covid. It can be considered as covid has come to an end). One can argue that the petrol prices are higher and job losses are still not recovered fully and the poverty level is getting higher in India and how we tag ourself as growing economy ?

Yes, we should agree that Fuel prices are higher, Jobless are not recovered and Poverty percentage is increased. But due to these reasons alone can we say Indian economy is not growing ?. India closed the financial year 2020-2021 with only 9% decline in total fuel consumption over the same period last year. According to the data shared by the Petroleum Planning and Analysis Cell, India's total consumption of fuel is

• 194.63 Million Tonnes (mt) in 2020-2021
• 214.13 Million Tonnes (mt) in 2019-2020
• 194.60 Million Tonnes (mt) in 2016-2017

We were almost half of the year under lockdown in 2020-2021 and still our fuel consumption was low only by 9% compared to last year or as same as 2016-2017. This indicates our transportation need is higher now. This is because our businesses are growing inspite of increase in the petrol price

Yes, as per CMIE (Center for Monitoring Indian Economy) data, the national unemployment percentage increased to 8.32% in September 2021. One of the reason for this can be automation, technology growth and increase in new entrepreneurs. As per the details from IBEF (India Brand Equity Foundation), MSMEs in India increased by a CAGR of 18.5% from 2019 to 2020. Loan disbursal to MSMEs stood at Rs. 9.50 Trillion, a 40% increase compared with Rs. 6.80 Trillion in FY20. The number of registered MSMEs grew to 2.5 Million units in 2020

When many new companies are launched and more loans to new MSMEs are given, how can we consider only jobless for economy growth. We should also consider the new business growths turned employees to entrepreneurs. This is clearly a sign of Economy Growth

When comes to poverty percentage increase in India, it is not only in the hands of government. It should also be in the hands of every citizen and they should change their mindset from Saving to Investing. It should be like Earn, Save and Invest, not just Earn and Save. To beat any inflation, we should educate ourself through the the technology (internet) available and move towards growth. So, even this cannot be considered as the reason for negative economy growth. Government cannot keep giving money to poor to overcome the poverty. There are many opportunities in India and we need to educate ourself to be qualified for those jobs to overcome poverty

Companies in India are increasing, be it small scale or medium scale companies. Investments are flowing into these companies and import and exports are made simple these days. Due to these reasons, the companies are reducing their Debts and increasing their profits. This is a clear sign of boom in Indian economy. Few big companies in India who reduced their debts or deleveraged are below

• 
  Dixon Technologies - Reduced its total debt in FY20 by 37% to Rs.107 Crores on Y-O-Y basis. In FY21, the stock price has jumped around 170% in 1 year. In October 2020, the stock was trading around Rs.1,850 and now trading around Rs.5,100 touched an all-time high of Rs.6,243.60

• Fertilisers and Chemical Travancore - Reduced its total debt by 44% to Rs.1,105 Crores on a Y-O-Y basis. In FY21, the stock price has jumped around 160% in 1 year. In October 2020, the stock was trading around Rs.46.50 and now trading around Rs.121.00 touched an all-time high of Rs.153.00

• GTPL Hathway - Reduced its total debt by 49% to Rs.148 Crores on a Y-O-Y basis. In FY21, the stock price has jumped around 130% in 1 year. In October 2020, the stock was trading around Rs.119.00 and now trading around Rs.270.00 touched an all-time high of Rs.313.90

Above are few companies to mention and are many more companies fall under this category. This is a clear sign of increase in economic growth. According to RBI data, the slowdown in credit growth continues well into FY22. As of April 2021, non-food credit was down 0.8%. Petroleum industry credit was down by 8.6%. Iron and Steel company credit was down by 6.8%. This is a clear indication of deleveraging by companies and growth in Indian economy. The secret is to stay invested with the growing companies to beat the inflation and wealth generation.

Disclaimer: I am not in favor of any political party to speak Indian economy is growing and companies are deleveraging. It is my personal opinion with facts. This blog is not an investment or trade advise. This is for informational purpose. Consult your financial advisor before investing. 

Have a Great Day

B G Nareshkumar

Addition by Subtraction

Most precious things gets added in life by subtracting the unwanted things. Imagine you hold a beautiful garden and you made up the habit of watering the plants everyday. You feel very pleasant and happy seeing the plants grow. Imagine the garden hose bend in the middle. Some water can flow through but not much. If you want to increase the rate at which the water passes through the hose, there are 2 options. The first option is the crank up the value and force more water through the hose. The second option is to simply remove the bend in the hose and the water flow through naturally

We motivate ourself many times to do things. This is like cranking up the valve and forcing ourself to do things. This will sometimes increase the tension and adds friction to life. Meanwhile, building up small positive habits or removing / subtracting the unwanted daily behaviors is like removing the bend in the hose. By subtracting these unwanted things, we can add many precious things in long term

Japanese build the most effective way of work by changing their workspace. They made all the tools required by the employees easily accessible during work. This way, they subtracted the unnecessary movements or thoughts to add more productivity. It was said in a survey that Japanese products resulted in 5 times less service call than American products

When the first voice activated speakers were released, products like Google Home, Amazon Echo and Apple HomePod. People thought it is the easiest way to play music without using their hands to select and play music. Few years back it was easier to have the music stored in mobile phone and play it when needed instead of going to shop and buy CDs. So, the companies decided to subtract the physical  interaction with devices (which they thought unnecessary), this eventually added the revenue of the companies

In financial world, wealth can be added by subtracting the unwanted trades. Many traders think they need to buy or sell positions daily or weekly to make money in stock market. The more subtraction made to the number of unwanted trades, higher the wealth generated. If a trader keep on changing the position, higher the possibility of losing the trade. It is advisable for traders to wait atleast for a month to get the profits. Financial markets will give good result for a stock market trader who think he is working for an company and he gets payment / salary only by end of the month. Higher wealth generation is achievable by delayed gratification and on long term investment in a quality company.

Have a Great Day

B G Nareshkumar

Imitation

Most of the time we imitate others without our knowledge. This imitation can be useful at certain times but not always. When coming to stock market, imitation is most commonly followed practice by most of the traders and investors. People imitate 3 kinds of people in stock market

• The Friend or Relation
• The Majority
• The Powerful and Successful

Most of the time, people take trades or invest in stock market without having prior knowledge or without taking experts / professionals help. When coming to financial markets, people do not follow the step by step or patience procedure. They invest / deploy all the capital in one go. One of the main reason is looking at their friends and close relations who made quick money

Imitating the friend or relation is the easiest option and the most tempting option one does in investing and trading in stock market. When a friend or relation makes money first time or second time, people think it is very easy and invest all the hard earned money in one go. When the market reverses or goes against them, they book losses without knowing how to react or adjust. So, following or imitating our close friends and relations are quiet common in trading / investing stock markets. One should always gain experience before investing or take experts advice

People believes the news channel or social media. Most people look at the majority of people concern and they invest or trade according to them. People also believe, majority of people will not go wrong. But in stock market, the market attacks the majority of crowd and the one without patience and consistency goes out of the market soon. We should also understand that majority of people lose money in stock market. This means the stock market does not go where the majority of people travel. It travels with the people who have consistent and patience

People also believe that the most successful people will never do any mistake and their positions taken in stock market will always be right and give profits. One should understand that the stock market will treat everyone the same way. What makes them most successful is the way they handle things and the way they do their adjustments to markets action. To build that quality, one should learn continuously and progress consistently. Just by following or imitating the successful people, we can never be successful

Successful people will have a great background filled with failures and they know how to react for situations with their positive habits. It is always advisable to read more books and gain more knowledge before investing or trading. Even after gaining subsequent knowledge, it is always advisable to progress slowly and steadily

Have a Great Day

B G Nareshkumar

Selling: Banks & Newspaper Seller

Selling and Buying are 2 most important activities in any trade. People always think buying can happen individually without selling (in other words they think it is an standalone activity). However most people think, to sell anything you need to buy first. Let us understand this concept, Selling can happen without owning things prior or without buying things prior. In other words, buying is not the first activity to happen in any trade, selling can also happen first

Most people would wonder, how can i sell something without buying anything or owning it prior ? Lets take an example of a man who is selling news papers in railway station, bus station or any other public places in India. I'm not speaking about a person who is having a small stall and selling news papers and books. I'm talking about the person who walks all round the place, carrying the newspaper and selling the papers. Do you think, he is selling the papers buy owning it prior. No, he borrows those newspapers from the stall owner and sells it across to the people who comes to the station

For this activity, the newspaper seller gives the confidence to the stall owner that he will not cheat him. This is a kind of security given by the paper seller to the stall owner. So to perform this activity a kind of security is enough. So, the process flow is as below

• Provide security and get the product
• Sell the product
• Take your profit
• Give the base money to the owner
• Withdraw your security

At the end, he takes his profit out of his selling and gives the margin money to the shop owner. Let us understand this in a different way (a bigger picture). Imagine banks as that newspaper seller and Central bank (RBI) as the stall owner. Banks borrow money from RBI not owning it prior (say @ 4% interest) by giving security and sells it to its customers in terms of loan and collects the higher interest (say @ 7% interest to 12% interest). The 3% to 8% excess interest received is the profit to the bank

So, the top level of Indian financial system works by selling without owning it prior. But most people think they need to buy before selling. There are also many opportunities in stock market to sell stocks and later which can be bought. Many people created a myth that, it is more risky to sell first and buy next. If buying first is not risky, why most people in stock market lose money. Does that mean people who buy first always many money in stock market without risk ? 

I'm not saying buying first will not give profit. It definitely gives profit in long term on the quality stocks. It is point to note that Selling first can also give profit. It is not necessary that stock price should go down to make profit in selling first. There are concepts like time decay and premium decay in options, which give profits on selling without stock price going down

Selling First - Is it Optimistic Approach ?

Selling should not be considered as the activity of pessimism. Selling can also be optimistic activity. Let us see how 

• Buying Call Option means Stock price should go up to make profit - Optimistic approach

• Selling Put Option means Stock price should go up to make profit - Optimistic approach

Certain pessimistic activity in stock market can also be consider as optimistic activity considering the hedging concept. Say, If we Sold Put option (which means stock price should go up to make profit), for this we buy put option as an hedge. This hedge or buying put option cannot be considered as pessimistic activity. If a trader buys naked put option (which means stock price should go down to make profit) is an pessimistic activity

Let us avoid certain pessimistic activity and use selling in an optimistic way and create wealth.

Have a Great Day

B G Nareshkumar

Habits

Our habits are more important in achieving our goals. Habits has the capability to compound things. It was found in a survey that if we can improve ourself 1% everyday, we will improve ourself 37 times in 1 year. This 1% improvement everyday can be achieved by good habits. Habits are something which is repeated by ourself for any problem without even our full consciousness. Once we build our habits properly to react positively for problems faced, then our system (Mind, Body and Brain) will take care of the problem itself

Most people will have a goal to achieve short term and long term but only few will build the habit to achieve that goal. One of the main reasons many people fail in achieving the goal is not having the proper habit. One can have a goal of gaining more wealth by doing a specific business but unless if they build a habit of learning techniques continuously in that business either practically or theoretically, that goal will remain a dream

In Stock Market, situations never remain constant all the time. It changes from day to day, week to week or month to month. The only way to gain positive control over our Investment and Trading is by continuously learning and consistently investing. An investor or trader should build the habit of learning adjustments technique everyday, then when the actual issue comes in, our habits will take care of it. When a good trader takes 10 position, the possibility of having atleast 2 failures is common in stock market. The only way the trader can come out of that wrong trade positively or at the breakeven is by knowing the adjustment techniques

Let's take the current example in stock market, Nifty gained 800 points in 2 weeks ( 9 trading sessions ) from 4th till 14th of October 2021. This is 4% increase in 9 days. Bank nifty gained little more than 4% in 1 week. Any experienced trader will have an un-biased view about the market and will have positions both the sides. If one side move is giving a profit, the other side will be in a loss. So, to overcome this, an experienced trader should know how to manage his positions. This will come only through the habit of managing positions

If a trader do not build a habit of managing the positions, he will gain more fear and panic during the trading time and book the positions at loss. Even this rising market will not give him profits. One more additional thing a trader can build in managing the positions well is by Habit Stacking. Habit stacking means when a person decides to do certain thing as a habit, he can attach that new habit to the old habit which he does everyday

For example, Let's say a person drinks a cup of coffee every morning. Now, he wants to build a habit of meditating every morning. Then he can build this habit stacking by saying himself "After i pour my cup of coffee each morning, I will meditate for one minute". This way one can build the habit stacking. In stock market, if a person learned about hedging benefits and he wants to hedge positions every time he sells an option, he can use this habit stacking process to have the risk managed. Build your habits positively and make things work better. 

Have a Great Day

B G Nareshkumar

Market Price & Book Value (Price Vs Value)

Current Market Price (CMP) and Book value plays a major role in purchasing any business in stock market. Current market price is the price at which the stock is trading currently. Any investor should pay this price to buy the business. In my opinion, there is another way of looking at the stock through Book value 

Let's compare this with buying a brand new car. When we look at the newly launched brand new car in the showroom and ask for the price, that's exactly the Current Market Price of the car. We need to pay that price to own that car and drive home. Similarly any stock behaves that way. On the other hand, when we dismantle that car into pieces and sell all the spare parts completely. Will we get the same price of the brand new car displayed in the showroom ? 

I believe we wont get the same price of the brand new car when we dismantle and sell it. There may be many reason to it. Few may be Assembling cost, Depreciation value and so on. But the exact value of the car is the Spare parts + Assembling cost + Labor cost + Profit percentage involved. This is exactly the book value of that car

Think if the new car price is Rs.30 lakhs and the book value calculated as described above is around Rs.15 lakhs. Then the P/B ratio (CMP / Book Value) is 30 lakhs / 15 lakhs = 2. Will we consider to buy that car ? Probably sometimes yes. Let's imagine if the book value is Rs.5 lakhs. Then the P/B ratio is 6. Will we consider to buy that car now ? One should definitely not buy that

On the other hand, if the CMP of the car is Rs.30 lakhs and the Book value is Rs.32 lakhs. Then the P/B ratio is 0.93. This means the car / business / stock is undervalued. In most cases, people do not look the book value of the business. They buy the business which has very high P/B ratio. Normally, if the P/B ratio is around 1.5, then we can consider that as a great business (my point of view)

Similarly, if we buy a car worth of Rs.30 lakhs and in next 2 years, the depreciation should be considered in valuating the price of the car. So the book value of the car is Buy price - Depreciated value of the car

In financial terms, book value is companies equity value as defined in financial statements of the company. Book value represents the fair and accurate picture of the company's worth

I would recommend any investors to consider this book value before buying any business. Most people look only the Current market price and they come to a decision. One should understand the sector and individual company business very well to calculate the book value.

Have a Great Day

B G Nareshkumar

The Maharajah Airlines & Tata

How would you feel if the company you started was taken by the government and after 68 years it comes back to you with 100% share ?

How many of us know Air India was started by Tata Group in 1932, but in 1947, as India gained Independence, the government bought 49% stake in Air India. In 1953 the government bought the remaining stake and the Air India was nationalized

In 2007, Air India with few international flights was merged with Indian Airlines (Domestic carrier) to reduce the losses. The airlines was poorly run and managed. That was the last time Air India made profit. In 2009, the government spend over Rs. 1,10,000 Crores to make up the loses but it didn't go well

By August 2021, Air India's debt was Rs.61,562 Crores. Everyday Air India suffers a loss of Rs.20 Crores which is Rs.7,300 Crores loss per year

Air India (AI) was sold to Tata Group and the confirmation is released by Indian government on Friday (08.10.2021). After 68 years, Air India is all set to return to the Tata fold. Tata Sons subsidiary Talace Pvt. Ltd emerged as the winning bidder for the national carrier Air India quoting an enterprise value of Rs.18,000 Crores. The government will take a hit of Rs.28,844 Crores

The Tata's will own 100% stake in Air India and 100% in its international low-cost arm Air India Express and 50% in the ground handling joint venture Air India SATS. Tata will own 141 planes and access to a network of 173 destinations including 55 international ones. Tata will also have the ownership of iconic brands like Air India, Indian Airlines and The Maharajah

The government aims to complete the transaction by December 2021. Government will transfer all its share and handover the airlines to Tata. Tata (Talace) has quoted an enterprise value of Rs.18,000 Crores. Of this Rs.15,300 Crores is the debt component and the remaining Rs.2,700 Crores will be cash paid to the government 

Ratan Tata (Chairman of Tata Groups) said in a statement "On an emotional note, Air India under the leadership of Mr. JRD Tata had at one time, gained the reputation of being one of the most prestigious airlines in the world. Tata will have the opportunity of regaining the image and reputation it enjoyed in earlier years"

He also added that it will take considerable effort to rebuild Air India and also at the same time it will provide very strong market opportunity to Tata Group's presence in the aviation industry

Tata sons owns 84% share in Air Asia, which has market share of 5.2%

Tata sons owns 51% stake in Vistara which has market share of 8.3%

Tata sons Air India market share will be 13.2%

Altogether, Tata Sons will hold the market share of 26.7% and the second biggest after Indigo

Air India and Air India Express have 13,484 total permanent employees

Tata Sons will retain all employees for a period of 1 year. In the second year, if anyone has to be removed, they will be offered with Voluntary Retirement Scheme. They will also be provided with gratuity and provident fund benefits. Post retirement medical benefits will be taken care by the government

I personally look forward for a better opportunities and steady growth in the aviation industry going forward.

Have a Great Day

B G Nareshkumar

RBI's Monetary Policy, BPS & Repo Rate

RBI's Monetary Policy Committee is responsible for fixing the interest rates in India. The meetings of Monetary Policy Committee are held at least 4 times a year (at least once Bi-Monthly). This committee has 6 member and the main objective of this body is to maintain the stability and boosting up the growth rate of the country's economy

6 member team of the Monetary committee as of today (08.10.2021) is

• Governor of the Reserve Bank of India - Shaktikanta Das

• Deputy Governor of the Bank in charge of Monetary Policy - Michael Debrata Patra

• Executive Director of the Bank in charge of Monetary Policy - M K Saggar

• Member of Prime Minister Narendra Modi's Economic Advisory Council - Ashima Goyal

• Senior Advisor at the National Council for Applied Economic Research - Shashanka Bhide

• Finance and Accounting Professor at the IIT, Ahmedabad - Jayanth Varma

Ashima Goyal, Shashanka Bhide and Jayanth Varma will hold office for the period of 4 years from the date of appointment, other three members are official. None of the central government nominees are eligible to be re-appointed

RBI (Reserve Bank of India) has announced the monetary policy decision today (08.10.2021). RBI's monetary policy committee voted 5:1 to maintain the repo rates. At present, Repo rate offered by RBI is 4.00% and the reverse repo rate offered is 3.35%. RBI retained the Gross Domestic Product (GDP) growth projection for the current fiscal at 9.5%. However it trimmed the CPI inflation projection to 5.3% from 5.7% for the fiscal year

Next Monetary policy committee meeting will be from 06th December 2021 to 08th December 2021

Basis Points (BPS) used to measure interest rates and other percentages in finance. Percentage changes and basis points can be summarized as 1% change = 100 basis points or 0.01% = 1 basis point. Basis point comes from the base move between two percentages or the spread between two interest rates. Because the changes recorded are usually narrow and the small changes can have outsized outcomes, the "basis" is a fraction of a percent

For example, if the Reserve Bank of India raises the target interest rate by 25 basis points, it means the rates haven risen by 0.25% percentage points. If the rates were at 2.50% and the RBI raised them by 0.25% or 25 Basis points, the new interest rate would be 2.75%. An analyst may state that a fund with 0.35% in expense is 10 basis point lower than another with an annual expense of 0.45%

Repo Rate is the rate at which Central Bank (Reserve Bank of India) grants loans to commercial banks like HDFC Bank, ICICI Bank, Kotak Bank and so on against government securities. Reverse repo rate is the interest offered by RBI to banks who deposit funds with them. At present, Repo rate offered by RBI is 4.00% and the reverse repo rate offered is 3.35%

By knowing the monetary policy committee details along with BPS and Repo rate, one can understand how the banking and banks stocks could perform in coming months. Let's say if the interest rate (repo rate) percentage was increased in todays RBI Monetary Policy Committee meeting, higher chance of banking stock could have gone down. Since these rates were unchanged and expecting for the corporate results announcement in coming weeks, we can expect the banking stocks to perform well

Have a Great Day

B G Nareshkumar

Pandora Papers

Before discussing about Pandora Papers let us understand what is International Consortium Investigative Journalism (ICIJ)

ICIJ is a global network consists of 280 investigative journalist in more than 100 countries and territories. They also partner with more than 100 media organizations which includes BBC, The New York Times, The Guardian and so on. These journalist collects data of a person individually across the globe and they collaboratively analyze in-depth and come to a conclusion about an investigation. ICIJ is a US based non-profit organization

What is the Offshore outsourcing / dealings? Let's say, a company is involved in product development or services in a specific country. The company hires an external organization to do certain business functions / activities in different country apart from its core country is called offshore outsourcing

By having the job outsourced in a different country, many companies involve in tax evasion and money laundering. This is also an habit for individuals and companies to keep their finances secret. The details of such companies and individuals are mentioned in Pandora papers. This not just gives the name of the person, it gives all the details of the individual holding in different countries including the net worth

The Pandora papers published on Sunday ( 03rd October 2021 ) are based on the documents leaked to the International Consortium Investigative Journalism (ICIJ) exposed the offshore dealings of Kings, Presidents and Prime Ministers, including Jordan's King Abdulla II, Czech Prime Minister Andrej Babis and Kenyan President Uhuru Kenyatta

The ICIJ with its 2 year effort launched 11.9 Million confident files aided with the effort of more than 600 journalists from 150 media outlets. The team also verified the information from the 2.94 terabyte haul by cross referencing it to public records from more than 12 countries

The ICIJ found that the documents were linked to more than 330 politicians and public officials, including 35 current and former national leaders in more than 91 countries and territories. Indian cricketer Sachin Tendulkar was also one among that list. Pandora papers are the latest leaks of financial documents by ICIJ, they have also released the previous versions as below

• Lux Leaks in 2014
• Panama Papers in 2016
• Paradise Papers in 2017
• FinCen Files in 2020

These documents made significant changes in world politics earlier. What will the current Pandora Papers will do the world now ? Let's watch this space carefully

Our Indian Government, on Monday (04th October 2021) said it will investigate this matter. This investigation will be monitored by a multi-agency group headed by central board of direct taxes (CBDT) chairman. It will also comprise representatives from CBDT, Enforcement Directorate, Reserve Bank of India (RBI) and Financial Intelligence Unit

There are around 380 Indians are on the list, who have been exposed for ringfencing their wealth through shadowy financial transactions and using offshore tax havens to hide assets worth millions of dollars.

Have a Great Day

B G Nareshkumar

Bitcoin Vs Business

Many people these days have a confusion on whether to invest in Crypto currencies or in Stock Market. Also, i get comments from many people that Stock Market does not give income as Crypto market

Let us take an example of the famous crypto currency "Bitcoin" and the Stocks / Listed Businesses in Indian Stock Market

Before we jump into the comparison or understanding the investment, let us also understand that Crypto currencies work 24 hours a day, 7 days a week. However, Indian stock market working / trading hours are from 9.15 AM till 3.30 PM from Monday to Friday (I'm talking about Equities and Derivative Market). Incase if there are any festivals fall on weekdays, the stock market may remain closed on that particular day (Make note: Not on all festivals)

Let us also understand that Passive Income is the one which should make money or generate wealth for us while we are sleeping. For that, first we should sleep properly and peacefully. I just wonder if i can sleep if my market works 24/7

The important point to note here is, Nifty has Upper and Lower limit halting process. If the market goes beyond 10% (Up or Down), Nifty & Sensex trading would halt and resume after sometime or it can remain closed for the entire day. The more information about this is available in the below blog for your reference

https://bgnareshkumar.blogspot.com/search?q=halting

Let us take the example of Tata Steel (one of my famous stocks), The stock price was trading around Rs.382.30 in October 2020 and currently trading around Rs.1,294.05. During the course of 1 year, Tata Steel was very consistent in giving profit as we can see in this chart. Tata Steel was trading with a Face Value of 10

The Revenue of the company is Rs.1,56,294 Crores, Net Profit is Rs.7,862 Crores and Earnings per share is Rs.63.78. Promotors hold 34.41% of the share and the pledge of promotors share came down to 1.55% from 3.37%

This rise in price is about 3.40 times the investment in last 1 year. It is also to be noted that in 06th August 2020, company has given a dividend of Rs.10 per share and in 17th June 2021, company has issued a dividend of Rs. 25 per share. Around a year back for the worth of Rs. 7.70 lakhs (worth of 1 bitcoin) we could have held 2014 share of Tata Steel. The dividend alone for these share for 1 year would be Rs.70,495.00

When we are about to take the 1 year data of Bitcoin. It was trading around Rs.7.70 Lakhs in October 2020 and currently trading around Rs.35.60 Lakhs. During the course of 1 year, Bitcoin had great volatility and the consistency was a question here as we see from the chart

This rise in price is about 4.60 times the investment in last 1 year. Bitcoin do not pay any dividend or interest, investors income is purely based on the price increase of the Bitcoin

There are also other stocks in Indian stock which performed better than Bitcoin. Now, let us see Adani Enterprises. This stock was trading around 326.60 in October 2020 and went to the high of Rs.1,717.20 in this 1 year time and currently trading around 1,455.00 per share. Market capital of the stock is Rs.1,60,429 Crores

The Revenue of the company is Rs.39,537 Crores, Net Profit is Rs.746 Crores and Earnings Per share (EPS) is Rs,8.39 per share. The promotor holding percentage of the company is 74.92% and the Promotor pledge percentage came down to 4.51 from 32.42 last year. Rise in price is about 4.62 times the investment in last 1 year

There are many companies gave greater returns in past 1 year compared to Crypto currencies. It is all about we need to analyze and predict the companies growth with patience and consistent investment. I have listed few companies for your information

My intention in this blog is not to challenge the Crypto Currencies. This is for an information that stocks have the greater potential as they are not just a trading price instrument, they are Businesses. A value business may have the delayed gratification but it has a product or service to provide us. The demand will always be there in a quality business with futuristic approach. Just grab it and enjoy the beauty of life.

Have a Great Day

B G Nareshkumar

Automated Recurring Payments & Equated Monthly Installments (EMI)

Many of us would be having Recurring Payments set with many of the banks for Home Loans, Car Loans, Business Loans, Personal Loans and so on. All those amounts are calculated in advance and being debited from our bank accounts on monthly basis. These are called as Equated Monthly Installments (EMI)

From 1st October 2021, Reserve Bank of India (RBI) has imposed a new rule on this automated recurring card payments. The new rule is, if your monthly subscription amount of any service exceeds Rs.5,000, then an additional factor of authentication (AFA) will become mandatory

On 4th December 2020, RBI has directed all banks including Regional Rural Banks (RRBs), Non-Banking Financial Companies (NBFCs) and payment gateway that the processing of recurring transactions (either domestic or cross-border) using cards or Prepaid Payment Instruments (PPIs) or Unified Payment Interface (UPI) under arrangements / practices not compliant with AFA would not be continued beyond 31st March 2021

However, many banks and financial institutions are not ready with the process and forced the RBI to extend the deadline on recurring payments till 30th September 2021 such as 

• Utility Bills Payments
• Recharge of Phones
• DTT Payments
• OTT Payments
• Loans Recurring Payments

Now, Banks and other payment gateway institutions need to take the customers authority using a OTP (One-Time Password) for recurring payments above Rs.5,000. This should be a welcome move by all citizens of the country. No one can take money from our bank account without our knowledge. Moreover each and every time when they need to take amount from us, they need to ask our permission

Even the bank loan EMI debit will hit due to this new rule by Reserve Bank of India. For this payments to be successful, banks should send pre-debit message to the customers at least 24 hours prior to the payment

The new conditions prescribed by RBI require a cohesive effort by all stakeholders including Card Issuing Banks, Merchant Acquiring Banks, Card Networks and Merchants. A common industry-wide platform is being developed and HDFC Bank has completed its internal development and integrations

ACTION NEEDED / BEWARE OF

From this month (October 2021) onwards watch your payments carefully and authorize only the one which are required. Do not be careless in approving all messages which you receive. Your careless approval might cause some hackers to withdraw all your hard earned money

Have a Great Day

B G Nareshkumar